Inflation data is the biggest event of the week. On Wednesday, the US Department of Labor announced that PPI rose 0.2% in August, cutting off a decline of 0.1% in the previous month. Compared to last year, the index grew by 2.4%, the year before last, it grew by 1.9%.
And although last month’s PPI was below the forecast of 0.3%, prices were able to continue their growth, which today is one of the key problems that occupy the minds of lawmakers.
The Federal Committee for Operations in the open market has repeatedly argued that in order to further implement the plan for the normalization of monetary policy, strong market conditions and a prolonged increase in inflation are necessary. Otherwise, the economy will not accept change adequately.
In this regard, members of the committee expressed different opinions. The last “minutes” from the Fed showed differences of opinion. Some lawmakers argued that the regulator should avoid further policy changes this year. Others warned about the risks associated with the cessation of raising interest rates and lowering the Fed’s balance sheet.
The main PPI, excluding volatile components such as food, energy and trading services, grew by 0.2% last month and 1.9% for the year.
What lies ahead?
With the approach of the Fed meeting, which will be held on September 19 and 20, investors are beginning to speculate more and more not on the topic of what chairman Janet Yellen will say about plans for monetary policy.
By and large, there is no hope of a change in the interest rate this month, all hopes are pinned on December. However, data obtained using the CME Group’s FedWatch tool report that investors estimate the likelihood of raising interest rates by the end of the year at 40%.
On the eve of today’s session, attention will be focused on data on consumer inflation. CPI will be known at 12:30 GMT with a 0.3% growth forecast.
If the data exceeds expectations, I can see a turnaround in expectations of changes in the monetary issue and, of course, strong support for the US dollar.